A Carluzzo Rochkind & Smith note: Following is an article by Virginia Lawyers Weekly. We did not handle this case, but it brings up important marital points your divorce lawyer should be familiar with. For more than 30 years our divorce lawyers in Manassas have helped clients with such matters in Prince William County, Fairfax County, Woodbridge, and throughout Northern Virginia. If you have any questions or would like to schedule an appointment, please contact our law firm at (703) 361-0776.
Domestic Relations: Man must reimburse ex for half of student loan balance
By Virginia Lawyers Weekly – 4/30/2024
Considering the parties’ agreement as a whole, the circuit court did not err in determining that the parties intended for husband to be solely responsible for his student loans and ordering him to reimburse wife for one-half of his student loan balance.
Background
Benjamin J. Brown appeals a final order of divorce from Stephanie N. Brown, challenging several aspects of the equitable distribution award.
Student loans
There is no dispute that husband incurred student loans before the parties’ marriage. Husband paid his loans with his income earned during the marriage. Husband argues that the circuit court erred by finding that the premarital agreement required him to reimburse wife for one-half of the reduction of his student loan balance and that their agreement “overrode” Texas law.
Texas law provides that a court “may not recognize a marital estate’s claim for reimbursement for … a student loan owed by a spouse.” But Tex. Fam Code § 3.410 allows the parties to contract around the prohibition in § 3.409(5). The question presented here is whether the parties’ premarital agreement contracted around the prohibition in § 3.409(5).
Paragraph 4.02 of the premarital agreement provided that “[a]ll other liabilities and obligations presently owned by [husband], of every kind and character, are the sole liabilities and obligations of [husband], which may be satisfied and paid from [husband’s] separate property.” Paragraph 4.02 further provided that the “parties acknowledge that a marital property reimbursement claim may arise if community property or [wife’s] separate property is used to pay [husband’s] existing liabilities.”
Under husband’s theory of the case, a marital reimbursement claim can’t arise in the context of paying down student debt. But can’t arise would be inconsistent with may arise as used in paragraph 4.02. Thus, the circuit court did not err in finding that the parties “overrode” Texas law by contracting around the prohibition expressed in Texas Family Code § 3.409(5).
“The legislature and the people of Texas have made the public policy determination that premarital agreements should be enforced.” Similarly, in Virginia, “the general rule is that agreements between husband and wife relating to the adjustment of property rights, even though in contemplation of divorce, are not violative of established public policy unless collusive or made to facilitate a separation or to aid in procuring a divorce.”
Here, the parties’ premarital agreement, including paragraph 4.02, does not violate public policy. Considering the parties’ agreement as a whole, the circuit court did not err in determining that the parties intended for husband to be solely responsible for his student loans and ordering him to reimburse wife for one-half of his student loan balance.
Tax liability
Husband argues that the circuit court erred by ruling that the premarital agreement required him to reimburse wife $20,527 for an underpaid tax liability. Husband concedes that if wife had used her separate property to pay the tax liability, he would be responsible for reimbursing her half of the payments under the premarital agreement. According to husband, however, wife used community funds to pay the tax liability; consequently, the circuit court erred in ordering him to reimburse her. The court agrees.
401(k)
Husband argues that the circuit court erred by finding that he was not entitled to any portion of wife’s Chesterfield Oral Surgery 401(k) account. He asserts that wife worked at the practice and received income from it during the marriage. Husband further contends that deposits were added to the account during the marriage, and those deposits were community property. Husband claims that he was entitled to one-half of the deposits to the account based on the language of paragraph 2.02, which defined “[d]eferred compensation attributable to employment during marriage” as community property.
The circuit court found that husband was not entitled to any portion of wife’s Chesterfield Oral Surgery 401(k) account because “no community property was deposited in that account” and wife “did not receive employment income from Chesterfield Oral Surgery.” The evidence supports the circuit court’s findings.
The premarital agreement listed the 401(k) account as wife’s separate property and provided that it would remain her separate property. Paragraph 2.02 defining deferred compensation as community property did not apply because the 401(k) account was not “attributable to employment” during the marriage.
Affirmed in part, reversed in part and remanded.
Brown v. Brown, Record No. 0041-23-2, Apr. 9, 2024. CAV (unpublished opinion) (Petty). From the Circuit Court of King George County (Hewitt). Lauren K. Grant (Stiles Ewing Powers, on briefs), for appellant. Benjamin R. Rand (Blackburn, Conte, Schilling & Click, P.C., on brief), for appellee. VLW 024-7-117. 10 pp.
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